RBI Governor Sanjay Malhotra on Friday defended the central bank's policy stance, reiterating its commitment to the 4 per cent inflation target while stressing the need to look through temporary supply-side shocks. Addressing the post-policy press conference, Malhotra emphasized that the target remains sacrosanct for the RBI, stating that "the target is to be met over a medium term; it is not advisable to take action for every small deviation from the target." He clarified that the RBI's inflation target of 4% (with a tolerance band of +/- 2%) remains sacrosanct, with the Governor explaining that "the range of 2-6% is primarily for this purpose, while the endeavour, the focus, the target is 4%, but there can be fluctuations around that." Malhotra warned that the central bank will be very watchful if inflation is getting generalised, building into expectations and accordingly take action, emphasizing that "it is neither possible nor is it advisable to have it pegged in a very small range."
India's inflation likely rose to the RBI's medium-term target of 4 per cent in May, driven by a pickup in vegetable prices and higher fuel costs following the US and Israel war against Iran, according to a Reuters poll of economists. The June 3-8 poll of 38 economists forecast inflation, measured by the annual change in the consumer price index (CPI), rose to 4.0 per cent in May from 3.48 per cent in April. Kanika Pasricha, chief economic adviser at Union Bank of India, said "May '26 CPI likely crossed the 4 per cent threshold ... driven primarily by vegetables and transport inflation." Union Bank of India estimated transport inflation likely jumped to 4.15 per cent in May from -0.01 per cent in April, lifting its contribution to headline inflation to 36 basis points from nearly zero, reflecting the pass-through of higher fuel prices. The central bank raised its inflation forecasts to 5.1 per cent for this fiscal year, up from its earlier estimate of 4.6 per cent, with economists expecting higher input costs to gradually feed through to consumer prices.
RBI Governor Sanjay Malhotra emphasized that India's economy remains resilient, supported by strong domestic demand, investment, exports, financial stability and external buffers, as reported by Business Standard. However, the central bank warns that geopolitical tensions, rising oil prices, inflation risks and a weak monsoon could test growth prospects. Private consumption remains strong with urban consumption expected to be supported by services sector momentum, GST rationalisation and stable employment conditions. Manufacturing and services PMIs indicate continued expansion with business expectations remaining positive despite global uncertainties. Merchandise exports recorded strong growth in April despite higher freight and insurance costs, while services exports continue to show resilience and benefit from healthy global demand. Foreign exchange reserves stand at a healthy $682.3 billion, FDI flows remain strong, and services trade surplus and inward remittances provide support to the external account.
The Reserve Bank released the results of May 2026 round of its bi-monthly Inflation Expectations Survey of Households (IESH), conducted during May 2-11, 2026, in 19 major cities with 5,936 responses. As per Business Standard, the current median inflation perception of households increased sequentially by 60 basis points to 7.8 per cent compared to the previous round. Their inflation expectations for the next three months and one year edged up by 80 basis points and 50 basis points, respectively, reaching 9.3 per cent for both horizons. At the short-term horizon, the proportion of respondents anticipating higher general prices and inflation inched up, with similar trend observed across the product groups. This latest household survey data reinforces the RBI's concerns about rising inflation expectations and supports the central bank's cautious stance on monetary policy.
The Reserve Bank of India will soon release an updated list of upper-layer non-banking financial companies (NBFCs), Governor Sanjay Malhotra announced at the post-policy press conference. As reported by The Economic Times, "The list is there already. So, it continues till the time we have a new list. We will do it (update) shortly," Malhotra said without elaborating. Tata Sons, the holding company of the Tata group, has sought to de-register as an upper-layer NBFC, which would exempt it from the mandatory listing requirement, the deadline for which was September 2025. The central bank is examining this request and the new list will be finalised shortly, according to The Economic Times. The regulator has not released a list of upper-layer NBFCs for the financial year ended March 2026, making this update particularly crucial for financial sector regulations. Responding to a specific question on Tata Sons' application to surrender its upper-layer NBFC classification in an interview with ET in March, Malhotra said the matter is under examination and that the process for finalising a revised list is underway.
